Question

julian, cornelia, and sheila petitioned for a corporate charter for the purpose of conducting a retail shoe business. they met all of the statutory provisions, with the exception of having their charter recorded. this was simply an oversight on their part, and they felt that they had fully complied with the law. they operated the business for three years, after which time it became insolvent. the creditors desire to hold the members personally and individually liable. may they do so? explain.

Answer 1

Answer: Under section 2.04 of the Act, all parties are strictly liable for damages when acting on behalf of a company. Inadvertently forgot to file the articles of incorporation but represented the company to its creditors.

Explanation:

In the application of standard statutes, a corporation's existence usually depends on its articles of incorporation issued by the Secretary of State. The decision of liability here depends on the attempt to file a charter with the state. In the event of willful disregard, the parties will be jointly and severally liable for any relief sought by the creditor. But if they were unaware of their failure to file, a judge would determine their liability.